Krasner contends that distributions of potential power may vary from multipolar to hegemonic; and different international trading structures are made of either of these.
Krasner (1976) contends that the hegemonic state will have a preference for an open structure because it will increase its aggregate national income and power.
States must rely ultimately on their own resources and must strive to maintain their power positions in the system, even at high economic costs.
The theory of hegemonic stability by the realist school argues that dominance of one country is necessary for the existence of an open and stable international economy.
The relationship between hegemony and an open, stable economy has been challenged by some scholars “As US behavior during the interwar period illustrates, the possession of superior resources by a nation does not translate automatically into great influence or beneficial outcomes for the world.” [2] Realist trade encourages Import substitution industrialization (ISI) replacing imports with domestic production.
The liberal tradition consists of two schools of thought on the causes of peace, one emphasizes representative government and international institutions and the other advocates global markets and economic development.
Kantian Liberalism posits that democracy, economic interdependence and international organizations are optimal solutions for reducing the incidence of conflict.
Oneal and Russett's (2001) research design has become a standard choice of replications in studies assessing the Kantian peace triangle where democracies tend to be interdependent and members of the same International Government Organizations (IGOs).
Their research is consistent with the argument that democratic peace advocates economic interdependence and a joint need to attain membership in IGOs in order to prevent the incidence of conflict.
Recent cost-benefit calculations of trade take into account information as an important component in the explanation of the pacifying aspect of economic interdependence.
Through open trade, states reveal their intentions and capabilities and thus “relations become more transparent and reduce uncertainty.”[7] Furthermore, economic interdependence makes costly signals possible.
“Mechanisms that facilitate the transmission of credible information across international boundaries limit bargaining failure, enhancing interstate peace.” [8] There is some disagreement about the interdependence liberal thesis among some scholars.
"[9] Despite the scrutiny, there is a long-held position that economic interdependence has a pacifying effect on interstate relations, evidenced by research conducted by Oneal & Russett 1999 [10] and Xiang et al. 2007.
Keohane & Nye (1987) put forth four conditions that make the use of force by large states costly: Liberal trade encourages export led growth (ELG), leaving traders and consumers dependent on foreign markets.
Liberals argue that these actors have an incentive to avoid hostilities with their trading partners, since any disruption in commercial relations would be costly.
This view argues that increasing interaction among traders and consumers (interdependence) promotes peace; free trade fosters a sense of international community that reduce interstate conflict and tensions.
Moreover, shifts in power relations are widely regarded as a potent source of military conflict.” Economic interdependence and greater openness exposes domestic economies to the exigencies of the world market.
As trade flows and the level of interdependence increases, so do the incentives for states to take military actions to reduce their economic vulnerability.
Similarly, Gartzke & Hewitt (2010) argue that the “extension of economic and other interests beyond national borders increases incentives to police relevant regions and exercise influence, sometimes through force.” The motives for conflict, which historically were concentrated among the powerful and their ambitious challengers, are today clustered among the poor, and between the poor and the rich (Gartzke & Hewitt (2010).
Traditional interpretations of the capital peace contend that development and global markets will eventually eliminate resource competition as a motive for war.
This view was eventually deemed outdated, as “it became clear that needed raw materials would continue to make their way to industrial centers through free markets, rather than through mercantilist autarkies (Gartzke & Hewitt, 2010, p. 122).
Gartzke and Hewitt (2010) challenged this by demonstrating that it is economic development and market freedoms, rather than political liberty that result in interstate peace.
Institutional ties promote the exchange of information about the economic gains and losses of participating member states, thereby reducing uncertainty about the distribution of benefits.
The reciprocal nature of this system helps guarantee that economic concessions made by one state will be repaid, rather than exploited by its counterpart.